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With CETA comes needed regulatory reform

(Photo: Wikimedia)

Editor’s note: we welcome Ed Hollett to the Straight Talk blog. Ed has been hired as AIMS Senior Fellow based in St. John’s, and will be a regular contributor to this space.

By Ed Hollett, AIMS Senior Fellow

In 2012, the fishing industry in Newfoundland and Labrador sold about $119 million worth of fish and other seafood to the European market. The provincial fishing industry was worth about $1 billion that year. Both of those numbers are dwarfed in comparison with the $25 billion European fisheries market.

Newfoundland and Labrador’s share of that big market was so small because of European tariffs. They added 25 percent to the cost of direct fish imports from Canada and up to 20 percent on shellfish.

The Comprehensive Economic and Trade Agreement (CETA) will eliminate those tariffs. This is the principal value of the European trade agreement to the fishing industry throughout Atlantic Canada.

The agreement gives the Canadian industry fair access to a lucrative market. CETA brings opportunity, including the chance to improve the fishing industry.

The cost of social engineering

For Newfoundland and Labrador, CETA will also mean the elimination of Minimum Processing Requirements, or MPRs. It will also increase pressure to eliminate other restrictions that have kept the fishery from developing into a modern, prosperous enterprise for everyone involved.

MPRs set minimum levels of processing that must be done on every species before product can be shipped to market. They are designed solely to keep work in fish plants in rural Newfoundland and Labrador. They have worked very well, in that respect. In 2015, there were twice as many workers processing fish in Newfoundland and Labrador compared to Nova Scotia. But the catch is a great disparity in earnings between workers in these provinces

The value of fish landings has generally been higher in Nova Scotia (2016: $1.6 billion) than Newfoundland and Labrador (2016: $1.4 billion). With MPRs, more plant workers in Newfoundland and Labrador have to share a similar- or smaller-sized pie of earnings. A 2008 study by the Department of Fisheries and Oceans demonstrated the impact of policies like MPRs. Plant workers in Newfoundland and Labrador earned about half as much as their Nova Scotia counterparts and about one-third less than the regional average for plant workers. Self-employed fish harvesters were actually in a worse position in comparison to their Nova Scotia counterparts or the regional average.

(Source: DFO)

By mandating an oversupply of labour, MPRs artificially suppress wages. This helps to explain the difference between the earnings of processing workers in Nova Scotia and Newfoundland and Labrador.

More importantly for economic growth, MPRs told processors what to produce regardless of what customers were looking for and regardless of the value of the final product in the market. Processing restrictions hindered processors from finding ways to process landings for species such as yellowtail flounder that couldn’t be processed economically in Newfoundland and Labrador. The same restrictions also forced the provincial government to spend money prosecuting companies for trying to meet market demand or issuing exemption after exemption to the unworkable processing rules.

The problem of harmful restrictions is not confined to Newfoundland and Labrador. In 2015, for instance, federal license restrictions prevented New Brunswick crab harvesters from selling their catch to a company in Newfoundland and Labrador, even though the company was offering a better price than New Brunswick plants.

CETA brings Atlantic Canadians access to a new market for their fish and other products and services. It also brings the opportunity to get rid of ideas that simply don’t work any more, if they ever worked at all.